Diageo's open offer for USL not to kick in yet

The Rs 5,500 crore open offer from Diageo to the shareholders of United Spirits will not be completed in the January 7-18, 2013 window, the schedule earlier announced by Diageo. This, because there are quite a number of statutory clearances, which are still pending for the $2.1 billion transaction. During first week of November 2012, Diageo had announced that it will be acquiring upto 53.1% in United Spirits through multiple transactions including an open offer, subject to regulatory approvals. According to information available, the Competition Commission of India, Sebi and RBI approvals are yet to come in for this transaction. It is understood that the companies are now working at a timeframe of completing the transaction within end of this quarter.

During mid-December 2012, Diageo had announced that it has been notified that the shareholders of United Spirits Limited have approved the preferential allotment to Diageo, at a price of Rs 1,440 per share, of new shares amounting to 10% of the post-issue enlarged share capital of USL. "This preferential allotment of 14.53 million new shares remains conditional upon the satisfaction of (or in certain cases the waiver of) a number of conditions described in the announcement of 9 November 2012, including competition approval or clearance in India and elsewhere," Diageo had said.

The stock of United Spirits on Monday is trading firmly at Rs 1,945 a share, at a premium of 35 per cent over the open offer price of Rs 1,440. Industry analysts have indicating that even after Diageo gets the approvals, the open offer may not be subscribed given the trading price of stock as against the open offer price.

Diageo had earlier said that in the event that Diageo does not acquire a majority interest it is likely that a minimum shareholding of 25.1 per cent, together with the voting arrangements and other governance arrangements agreed with the UBHL group and its relationship with Vijay Mallya as Chairman of USL, would enable Diageo to reflect the results of USL in its consolidated accounts.